Thursday, January 26, 2017

The Risk of Losing Productive Complexity

So many economic risks exist at a global level, that it can be difficult to discern what needs immediate attention. Nevertheless: among our greatest risks, is the possibility of losing productive economic complexity in the years to come. Without a sufficient response, more nations and governments are likely to double down on mercantile "solutions" to economic uncertainty. Now is the time to make certain, of real economy responses which extend well beyond bringing traditional manufacture "back home". Doubtless, such a protectionist mindset wouldn't have taken hold, had free markets already been strengthened and diversified, so as to allow everyone to take part.

Since free markets in knowledge use and building component definition have been held back, the risks of lost complexity are greater than what existed, prior to the Great Recession. Unfortunately, it's not completely off the mark for bloggers and others to compare the erratic leadership of prominent nations, with the leadership of countries whose economic complexity has hardly been encouraged.

Meanwhile, there's been too many years of "eminently reasonable" leaders, who nonetheless didn't work to promote the forms of productivity which result in greater output without excessive costs. Even the centuries old production standards of housing, means construction workers have scarcely held the job security of traditional manufacturing workers, whose incomes continue to benefit from the increased output of mass manufacture. For instance: why assume "real men" would rather build homes than take on "soft jobs", when building homes without today's added technological benefits, often means not even having sufficient wages to build a home of one's own? Anyone who has personally known construction workers is familiar with this reality.

The most encouraging response to political and economic uncertainty I've heard so far, is that a better understanding of productivity is crucial, to continued progress and prosperity. Hopefully, more individuals in the days ahead, will take this challenge to heart. While highlighting a productivity perspective (in macro) can be confusing at times, this earlier post from yesterday counts among my recent efforts. Before too long I'll put a series of productivity notes into a broader and (hopefully) more clear context. Unfortunately it can be difficult for society to focus on critical issues, when political distractions begin to pile up all too quickly. Plenty of thoughtful posts from multiple quarters may go unnoticed, as the latest atrocities from Washington and elsewhere drown them out. Which is why "calls to action" in the form of applied economic response, need to begin well before the "roof" already has gaping holes which let in the rain.

Again, I have suggested the possibility of alternative equilibrium constructs not as a replacement for general equilibrium conditions, but as a relief valve for too rigid equilibrium conditions. Too many successful groups now have little incentive to evolve, grow, adapt or otherwise make room for those who still seek economic entry. Yet in order for this broad set of economic expectations to remain stable, people have to at least allow growth to continue in ways which do not pose direct threats to existing investments and ways of life.

Eric Beinhocker in "The Origin of Wealth", reminded his readers that there's no such thing as a static equilibrium. When populations try too hard to ensure that everything about their lives remains the same, the consequent loss of dynamism can lead to more entrophy than might otherwise be the case. Even though prominent players on the present "game board" set the rules and dictate how resources are to be utilized, resource availability - and demand - constantly changes just the same.

As Jason Collins noted in a 2012 review of "The Origin of Wealth", Beinhocker didn't take the additional step of bringing complexity economics (as an applied science) to present day settings. In Beinhocker's defense, I can only note that we still need the institutional means which would make it possible to work out potential evolutionary paths such as mutual employment. I'm presently 300 pages in, and this book does offer evolutionary illustrations capable of providing additional perspective at a basic level, while citizens explore the early stages of knowledge use as a free market platform. Even though complexity economics has yet to benefit from an applied approach, there's still hope that its observations can also shed further light on the productivity dilemma of our time.